How to Feed the World in 2050 doc

Prerequisites for global food security 1 Enhancing investment in sustainable agricultural production capacity and rural development 2 Promoting technology change and productivity growt

How to Feed the World in 2050

Executive Summary

1 Introduction

2 Outlook for food security towards 2050

(1) The changing socio-economic environment

(2) The natural resource base to 2050 – will there be enough land, water and genetic diversity to meet demands?

(3) Potential for food security

3 Prerequisites for global food security

(1) Enhancing investment in sustainable agricultural production capacity and rural

development

(2) Promoting technology change and productivity growth

(3) Trade, markets and support to farmers

4 The risks and challenges

(1) Hunger amidst adequate overall supplies

(2) Climate Change

(3) Biofuels

5 Mobilizing political will and building institutions

Executive Summary

By 2050 the world’s population will reach 9.1 billion, 34 percent higher than today Nearly all of this population increase will occur in developing countries Urbanization will continue

at an accelerated pace, and about 70 percent of the world’s population will be urban

(compared to 49 percent today) Income levels will be many multiples of what they are now

In order to feed this larger, more urban and richer population, food production (net of food used for biofuels) must increase by 70 percent Annual cereal production will need to rise to about 3 billion tonnes from 2.1 billion today and annual meat production will need to rise by over 200 million tonnes to reach 470 million tonnes

This report argues that the required increase in food production can be achieved if the

necessary investment is undertaken and policies conducive to agricultural production are put

in place But increasing production is not sufficient to achieve food security It must be complemented by policies to enhance access by fighting poverty, especially in rural areas, as well as effective safety net programmes

Total average annual net investment in developing country agriculture required to deliver the necessary production increases would amount to USD 83 billion The global gap in what is required vis-à-vis current investment levels can be illustrated by comparing the required annual gross investment of US$209 billion (which includes the cost of renewing depreciating investments) with the result of a separate study that estimated that developing countries on average invested USD 142 billion (USD of 2009) annually in agriculture over the past decade The required increase is thus about 50 percent These figures are totals for public and private investment, i.e investments by farmers Achieving them will require a major reallocation in developing country budgets as well as in donor programmes It will also require policies that support farmers in developing countries and encourage them and other private participants in agriculture to increase their investment

In developing countries, 80 percent of the necessary production increases would come from increases in yields and cropping intensity and only 20 percent from expansion of arable land But the fact is that globally the rate of growth in yields of the major cereal crops has been steadily declining, it dropped from 3.2 percent per year in 1960 to 1.5 percent in 2000 The challenge for technology is to reverse this decline, since a continuous linear increase in yields at a global level following the pattern established over the past five decades will not be sufficient to meet food needs Although investment in agricultural R&D continues to be one

of the most productive investments, with rates of return between 30 and 75 percent, it has been neglected in most low income countries Currently, agricultural R&D in developing countries is dominated by the public sector, so that initially additional investment will have to come from government budgets Increasing private sector investment will require addressing issues of intellectual property rights while ensuring that a balance is struck so that access of smallholder farmers to new technologies is not reduced

Hunger can persist in the midst of adequate aggregate supplies because of lacking income opportunities for the poor and the absence of effective social safety nets Experience of countries that have succeeded in reducing hunger and malnutrition shows that economic growth does not automatically ensure success, the source of growth matters too Growth originating in agriculture, in particular the smallholder sector, is at least twice as effective in

benefiting the poorest as growth from non-agriculture sectors This is not surprising since 75 percent of the poor in developing countries live in rural areas and their incomes are directly or indirectly linked to agriculture The fight against hunger also requires targeted and deliberate action in the form of comprehensive social services, including food assistance, health and sanitation, as well as education and training; with a special focus on the most vulnerable

Many countries will continue depending on international trade to ensure their food security

It is estimated that by 2050 developing countries’ net imports of cereals will more than double from 135 million metric tonnes in 2008/09 to 300 million in 2050 That is why there is a need

to move towards a global trading system that is fair and competitive; and that contributes to a dependable market for food Reform of farm support policies in OECD countries is a

welcome step which has led to a decline in the aggregate trade distortion coefficient from 0.96

in 1986 to 0.74 in 2007 However, there is clearly still room for improvement There is also a need to provide support and greater market access to developing country farmers so that they can compete on a more equal footing Countries also need to consider joint measures to be better prepared for future shocks to the global system, through coordinated action in case of food crises, reform of trade rules, and joint finance to assist people affected by a new price spike or localized disasters

Climate change and increased biofuel production represent major risks for long-term food security Although countries in the Southern hemisphere are not the main originators of climate change, they may suffer the greatest share of damage in the form of declining yields and greater frequency of extreme weather events Studies estimate that the aggregate negative impact of climate change on African agricultural output up to 2080-2100 could be between 15 and 30 percent Agriculture will have to adapt to climate change, but it can also help mitigate the effects of climate change, and useful synergies exist between adaptation and mitigation Biofuel production based on agricultural commodities increased more than threefold from

2000 to 2008, In 2007-08 total usage of coarse grains for the production of ethanol reached

110 million tonnes, about 10 percent of global production Increased use of food crops for biofuel production could have serious implications for food security A recent study estimates that continued rapid expansion of biofuel production up to 2050 would lead to the number of undernourished pre-school children in Africa and South Asia being 3 and 1.7 million higher than would have been otherwise the case Therefore, policies promoting the use of food-based biofuels need to be reconsidered with the aim of reducing the competition between food and fuel for scarce resources

The world has the resources and technology to eradicate hunger and ensure long-term food security for all, in spite of many challenges and risks It needs to mobilize political will and build the necessary institutions to ensure that key decisions on investment and policies to eradicate hunger are taken and implemented effectively The time to act is now

How to Feed the World in 2050

1 Introduction

The sharp increases in food prices that occurred in global and national markets in recent years, and the resulting increases in the number of hungry and malnourished people, have sharpened the awareness of policy-makers and of the general public to the fragility of the global food system This awareness must be translated into political will and effective action

to render the system better prepared to respond to long-term demand growth and more

resilient against various risk factors that confront world agriculture, and to ensure that the growing world population will be able to produce and have access to adequate food today and

in future There is a need to address new challenges that transcend the traditional making horizons of producers, consumers and policy-makers

decision-In the first half of this century, global demand for food, feed and fibre is expected to grow by

70 percent while, increasingly, crops may also be used for bio-energy and other industrial purposes New and traditional demand for agricultural produce will thus put growing pressure

on already scarce agricultural resources And while agriculture will be forced to compete for land and water with sprawling urban settlements, it will also be required to serve on other major fronts: adapting to and contributing to the mitigation of climate change, helping

preserve natural habitats and maintaining biodiversity To respond to those demands, farmers will need new technologies to produce more from less land, with fewer hands

This perspective for 2050 raises a number of important questions Are current public and private investments sufficient to ensure adequate agricultural production potential, sustainable use of natural resources, infrastructure for markets, information and communication and research for technological breakthroughs for the future? Will resources, new technologies and supporting services be available to the people who will need them most - the poor? What needs to be undertaken to help agriculture meet the challenges of climate change and growing energy scarcity? What can be done to ensure food security in sub-Saharan Africa, the

continent facing the highest population growth rates, the severest impacts from climate

change and the heaviest burden of HIV/AIDS?

To consider these and associated questions, FAO convened a three-day Meeting of Experts

in Rome in June 2009 The following document takes major findings of that meeting into account and aims to serve as a basic background for the High-Level Experts Forum on

“How to Feed the World in 2050”, to be convened at FAO Headquarters in Rome on 12-13 October 2009

At the Expert Meeting in June there was consensus among participants that it should be possible to produce enough food in 2050 to meet the needs of a world population that will have increased to more than 9 billion, but that this positive outlook assumed certain

conditions are met and policy decisions taken Two conditions were considered essential for success in meeting the expected food needs on a sustainable basis One is increased

investment in research and development for sustained productivity growth, infrastructure institutional reforms, environmental services and sustainable resource management The other

is that policies should not simply focus on supply growth, but also on access of the world’s poor and hungry to the food they need to live active and healthy lives

2 Outlook for Food Security towards 2050

In the following, the key elements of current expert thinking regarding the outlook for food security towards 2050 will be summarized The key message from this assessment is that it will be possible to achieve food security for a world population of 9.1 billion people projected for that time, provided a number of well specified conditions are met through appropriate policies

2.1 The changing socio-economic environment

The main socio-economic factors that drive increasing food demand are population growth, increasing urbanization and rising incomes As regards the first two, population growth and urbanization, there is little uncertainty about the magnitude, nature and regional pattern of their future development

According to the latest revision of the UN population prospects (medium variant), the world

population is projected to grow by 34 percent from 6.8 billion today to 9.1 billion in 2050 Compared to the preceding 50 years, population growth rates will slow down considerably However, coming off a much bigger base, the absolute increase will still be significant, 2.3 billion more humans Nearly all of this increase in population will take place in the part of the world comprising today’s developing countries The greatest relative increase, 120 percent, is expected in today’s least developed countries

Source: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat (2007)

All of the growth in the world’s population, and some more, will take place in urban areas

By 2050 more than 70 percent of the world's population is expected to be urban

Urbanization will bring with it changes in life styles and consumption patterns In

combination with income growth it may accelerate the ongoing diversification of diets in developing countries While the shares of grains and other staple crops will be declining, those of vegetables, fruits, meat, dairy, and fish will increase In response to a rising demand for semi-processed or ready-to-eat foods, the whole structure of market chains is likely to continue its dynamic change towards a further concentration of supermarket chains While the share of the urban population is growing, however, rural areas will still be home to the

majority of the poor and hungry for quite some time Currently, one billion people cannot even satisfy their basic needs in terms of food energy Living in hunger hot spots, often ecologically fragile areas, many of them have to cope with conditions of high population pressure and deteriorating ecosystems

Source: FAO (2002)

Despite urbanization, rural populations will grow faster than employment in primary

agriculture, which is typically the case in transforming countries, so governments must

facilitate the gradual transition to non-agricultural employment This will require an

institutional environment in rural areas that is conducive to multiple sources of employment and income generation In Asia and Latin America a large proportion of the rural labour force

is already working full or part-time in non-agricultural jobs In the agriculture-based countries

of sub-Saharan Africa these shares are still much lower, especially for women The greater part of the rural labour force is still employed in agriculture and depends on productivity growth within smallholder agriculture to improve their incomes and food security However,

as the rural population pressure is increasing, governments will have to address the rural employment transition here as well

Global progress in food consumption

Sugar Vegetable oils Other Cereals Wheat

Rice

Projections of the third key determinant of future demand expansion, income growth, are

subject to greater uncertainty In the years preceding the recent crisis of 2008/09, economic growth had been particularly high in many developing regions, especially in Asia, but also in many countries of sub-Saharan Africa The financial crisis has interrupted this growth as a result of a complex set of factors, which need to be addressed systematically to reduce the chances of their recurrence Although the World Bank predicts growth momentum to turn weakly positive in 2010 and 2011, the pace and timing of the recovery is still highly uncertain and so are the consequences for the longer term outlook

So far, analysts believe that the longer-term effects of the financial and economic crisis on

economic growth will be relatively small Most projections of demand and supply towards

2050 use the World Bank’s baseline projections of economic growth The latest version

(submitted to the FAO Expert Meeting in June 2009) implies an average annual rate of GDP growth of 2.9 percent during the period between 2005 and 2050, breaking out into 1.6 percent for high-income countries and 5.2 percent for the developing countries Over the 45 year period, the rates are expected to decline everywhere to half their initial levels A key

consequence of this differential growth would be a major increase in developing countries’ share in global output from 20 to 55 percent As a result, the relative income gap (ratio of per capita GDP) between the two country groups will be narrowing, although absolute differences would remain pronounced and even increase further, given the current very large gap in

absolute per capita incomes Moreover, inter-country and interregional inequalities within the present-day developing world would tend to become more pronounced

Source: Mensbrugghe et al (2009)

Developing country growth (right‐axis)

High‐income country growth (right‐axis)

Developing country GDP (left‐axis)

High-income country GDP (left axis)

Income Growth

The future growth of food demand will be the combined effect of slowing population

growth, continuing strong income growth and urbanization in many of the developing

countries and associated shifts in diet structures, especially in the most populous ones, and gradual food saturation in many developing countries, as is already the case in developed countries Globally the growth rate of demand will clearly be lower than during preceding decades Nevertheless, the projected total demand increase is still significant in absolute terms, with only small differences between the main models

Moreover, it is to be noted, that the future total demand for agricultural commodities may

exceed the demand for food and feed more or less significantly, depending on the expansion

of demand for biofuels and on the technology used for the conversion of agricultural biomass into biofuels Hence, the development of the bio-energy market will also determine how far it will be possible to meet the growing demand with the available resources and at affordable prices

How far future growth of incomes and food demand will be adequate to achieve food security

will also be determined by the prospects for poverty reduction In this context, it is

encouraging to note that the secular decline of global poverty has intensified in recent

decades However progress has not been uniform and apparently it was interrupted during the current crisis While dramatic improvement was recorded in China and several other large countries such as Indonesia, India, Pakistan, Brazil, Mexico and South Africa Sub-Saharan Africa as a whole saw a large increase in the number of people living in absolute poverty and only a small decrease in the poverty ratio

2.2 The natural resource base to 2050 – will there be enough land, water and genetic diversity to meet demands?

In comparison to the past 50 years, the rate at which pressures are building up on natural resources – land, water, biodiversity – will be somewhat tempered during the coming 50 years due to the slowdown of demand growth for food and feed However, an expanded use of agricultural feedstock for biofuels and ongoing environment degradation would work in the opposite direction

Even if total demand for food and feed may indeed grow more slowly, just satisfying the

expected food and feed demand will require a substantial increase of global food

production of 70 percent by 2050, involving an additional quantity of nearly 1 billion tonnes

of cereals and 200 million tons of meat The background to this outlook will be discussed in the following section

Much of the natural resource base already in use worldwide shows worrying signs of

degradation According to the Millennium Ecosystem Assessment, 15 out of 24 ecosystem services examined are already being degraded or used unsustainably These include capture fisheries and water supply In addition, actions to intensify other ecosystem services, such as the ecosystem service ‘food production’, often cause the degradation of others Soil nutrient depletion, erosion, desertification, depletion of freshwater reserves, loss of tropical forest and biodiversity are clear indicators Unless investments in maintenance and rehabilitation are stepped up and land use practices made more sustainable, the productive potential of land, water and genetic resources may continue to decline at alarming rates

The available long-term perspective studies suggest that assuming such degradation is indeed

stopped or significantly slowed, the natural resource base should be adequate to meet the

future demand at global level However, bottlenecks are likely to occur at national levels,

particularly in countries where high demographic growth and the associated high growth of demand and limited commercial import capacity coincide with pronounced limitations of land

or water or particularly low yield levels If appropriate institutions and incentive systems are instituted, the rural populations of these countries can play a vital role in ensuring an

enhanced and sustainable delivery of ecosystem services, thus improving sustainable growth

of productivity and incomes locally and generating public goods at national and international levels

The world has considerable land reserves which could in theory be converted to arable land

However, the extent to which this can be realized is rather limited First, some of the lands currently not cultivated have important ecological functions which would be lost Second, they are mostly located in just a few countries in Latin America and sub-Saharan Africa, where lack of access and infrastructure could limit their use at least in the short term Taking these limitations into account, FAO projects that by 2050 the area of arable land will be expanded by 70 million hectares, or about 5 percent This would be the net balance of an expansion by 120 million hectares in the developing countries and a contraction of arable land

in favour of other uses in developed countries by 50 million hectares

Potential for Cropland Expansion?

South Asia East Asia Industrial

Countries

Transition Countries

The availability of fresh water reserves for the required production growth shows a similar

picture At global scale, there are sufficient capacities, but these are very unevenly distributed Irrigated agriculture covers one fifth of arable land and contributes nearly 50 percent of crop production Hence, it is extremely productive An increasing number of countries are reaching alarming levels of water scarcity and 1.4 billion people live in areas with sinking ground water levels Water scarcity is particularly pronounced in the Near East/North Africa and the South Asia regions and is likely to worsen as a result of climate change in many regions While supplies are scarce in many areas, there are ample opportunities to increase water use efficiency

Irrigation and water resources

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 11000 12000 13000 14000 Latin America and the Caribbean

Biodiversity, another essential resource for agriculture and food production, is threatened by

urbanization, deforestation, pollution and the conversion of wetlands As a result of

agricultural modernization, changes in diets and population density, humankind increasingly depends on a reduced amount of agricultural biological diversity for its food supplies The

gene pool in plant and animal genetic resources and in the natural ecosystems which breeders need as options for future selection is diminishing rapidly A dozen species of animals

provide 90 percent of the animal protein consumed globally and just four crop species provide half of plant-based calories in the human diet

FAO expects that globally 90 percent (80 percent in developing countries) of the growth in

crop production will come from intensification, in particular higher yields and increased

cropping intensity This would be in line with past trends, but represents a major challenge for future private and public research, including research for greater resilience of farming

systems

The future of agriculture and the ability of the world food system to ensure food security for a

growing world population are closely tied to improved stewardship of natural resources

Major reforms and investments are needed in all regions to cope with rising scarcity and

degradation of land, water and biodiversity and with the added pressures resulting from rising incomes, climate change and energy demands There is a need to establish the right incentives

to harness agriculture’s environmental services to protect watersheds and biodiversity and

to ensure food production using sustainable technologies

Even if globally the natural resource capacity may be adequate to achieve the 70 percent

increase in agricultural production needed to meet projected demand (without biofuels),

bottlenecks exist at national levels, namely in countries with high demand growth, fragile

environments and limited commercial capacity to import food or feed from the world markets

In order to ensure that resources are available in the required quantity and quality and in the locations where they are needed, large additional investments need to be made Priority

should be given to interventions in favour of agriculture-dependent countries in which high prevalence of hunger coincides with resource scarcity and low yields

Increased investment, effective regulation and incentives are needed with regard to all

three natural resources required for sustainable and stable production growth: land, water,

biodiversity The aim should be to stop over-exploitation, degradation and pollution, promote efficiency gains and expand overall capacities as appropriate Adequate regulation and

incentives are also needed to provide the rural population engaging in ecosystem services with win-win solutions to improve the sustainability of ecosystems, mitigate climate change and improve rural incomes

2.3 Potential for food security

The projections for the future socio-economic environment and the assessment of the situation and prospects of the natural resource base raise the question as to whether and under what conditions the estimated future food demand can be met and how food security can be

achieved

Based on the projected growth of population and incomes and expected changes in

consumption patterns, the FAO estimates future consumption levels for various commodities country by country Taking into account countries’ known resource capacities and projected development of yields, input use and technologies, and making assumptions about their future trading capacity, estimates are also made of future production levels, land use and trade At the same time, on the basis of available information concerning the distribution of incomes and access to food within countries, the future prevalence of hunger is estimated in terms of the proportion of populations not having access to an adequate level of food energy FAO’s long-term perspective studies thus seek to assess the implications of the projected socio-economic and demographic environment for future demand growth and to ascertain the extent to which individual countries and the world as a whole can meet this demand through production and trade and improve food security, based on reasonable assumptions about resource and productivity growth potentials

According to FAO’s baseline projections, it should be possible to meet the future food and

feed demand of the projected world population in 2050 within realistic rates for land and water use expansion and yield development However, achieving this will not at all be

automatic and several significant challenges will have to be met

The global average daily calorie availability would rise to 3050 kcal per person, a 10

percent increase over its level in 2003/05 To achieve this, global cereal production would need to increase by 40 percent overall, or by some 900 million tons between the 2006/08 average and 2050 The advent of biofuels has the potential of changing all that and causing world demand to be higher, depending on the energy prices and government policies Without biofuels, much of the increase in cereals demand will be for animal feed to support the

growing consumption of livestock products Meat consumption per caput for example would rise from 41 kg at present to 52 kg in 2050 (from 30 to 44 kg in the developing countries)

Should this perspective be realized by 2050, the level of per-caput food availability will still

vary widely between countries, although at higher levels Industrial countries will have

average availability levels of nearly 3600 kcal/person/day; the developing countries as a group may reach almost 3000 kcal

Source: FAO

To reach those levels of food availability, countries can either increase production or

increase net imports of food or a combination of both According to FAO’s long-term

projections towards 2050, today’s group of developing countries is projected to provide most

of the projected consumption growth by expanding their own production However they will also increase their food imports significantly For example, the developing countries’ net imports of cereals are projected to more than double from 135 million metric tons in 2008/09

to 300 million metric tons in 2050 The developed countries will be able to increase their export potential accordingly On their part, the developing countries will be growing net exporters of other food commodities like vegetable oils and sugar Again, the advent of

biofuels has the potential of altering these prospects as all three commodity groups are used as biofuel feedstocks

Source: FAO (2006)

Source: FAO (2006)

Even if the intra-national distribution of incomes and purchasing power does not change significantly, the projected rather high average levels of food availability would imply that the

prevalence of chronic hunger may recede considerably in most countries and problems

related to over-nourishment may become an issue in more countries

But unless there is a major shift in policy priorities hunger will not disappear Considering only the prospects for supply and demand for food and feed (as expressed in the market), and excluding any eventual growth in demand for biofuels, the prevalence of chronic under-nourishment in developing countries would decline to about 5 percent of their population by

2050 Five percent of the developing countries’ population in 2050 would still be 370 million people, an unacceptably high number Moreover, the average hides differences between countries Sub-Saharan Africa as a whole would still be at 7 percent and some smaller

countries could still have prevalence rates over 15 percent For almost 400 million people even the projected 70 percent growth in output of food and feed (and eventually the additional

Net cereal imports by developing countries

0 50

Their access to food will require a proper socioeconomic framework to address imbalances and inequalities Extra efforts of public policy will be needed, be it in terms of additional productive employment inside or outside agriculture, structural reforms creating a more equitable income distribution or targeted social safety nets Moreover, food production must

be carried out in a way that reduces poverty and takes account of natural resource constraints

IFPRI’s long-term projections also indicate the possibility of significant improvements in the prevalence of pre-school child malnutrition, though not as far and with considerable inter-regional differences South Asia and large parts of sub-Saharan Africa would maintain a relatively high prevalence

In conclusion, under the assumptions made for the baseline modelling of the outlook towards

2050, food security for all could be within reach The conditions under which this can be

achieved are strong economic growth, global expansion of food supplies by about 70 percent, relatively high production growth in many developing countries achievable through growing capital stock, higher productivity and global trade helping the low income food deficit

countries to close their import gaps for cereals and other food products at affordable prices

It should be underlined, however, that these projections do not yet take into consideration the

possibility of a more intensive competition between food and energy commodities for the

limited land and water resources As the recent crisis has demonstrated, under certain

conditions (high oil prices, first generation biofuel technologies, government support in several countries), the production of biofuels can expand rapidly and contribute significantly

to price increases and scarcities in the food and feed markets

It is obvious that the positive vision presented here contrasts strongly with the reality of recent

trends The number of chronically undernourished and malnourished people in the

world has been rising, not falling FAO estimates that the number of chronically

undernourished people has risen from 842 million at the beginning of the 1990s to over one billion in 2009 The recent increase was mainly the consequence of the recent financial crisis and the drastic food price increases and occurred although harvests had reached record levels

The existence of hunger in a world of plenty is not only shameful and a violation of the

human right to adequate food, hunger and malnutrition also entail large economic costs,

severely compromising the productivity of individuals and, when more than 30 percent of the population are chronically undernourished as in many African countries, the growth of entire economies In 2002, FAO estimated that, compared to business-as-usual, achieving the WFS goal of cutting by half the number of hungry people by 2015 would generate global annual incremental benefits of USD 120 billion during the period up to 2015

The world is not on track towards the global goal of hunger reduction - number of hungry in millions

Source: FAO (2009)

It is noted that a considerable number of developing countries have been successful in

improving food security The common characteristics of their policies and strategies include

political stability, good governance, strong economic growth, very much based on growth of agriculture in several of these countries, twin-track food security strategies and integration into world markets Unless food security is made a high priority of public policy in more countries, those that are still faced with low food consumption levels and high prevalence of chronic under-nourishment may face the prospect of food insecurity persisting for a long time

to come

3 Pre-requisites for global food security

Action is needed now to ensure that the required 70 percent increase in food production is achieved, and that every human being has access to adequate food First, investment in developing country agriculture has to increase by at least 60 percent over current levels through a combination of higher public investment and better incentives for farmers and the private sector to invest their own resources Second, greater priority has to be given to

agricultural research, development and extension services in order to achieve the yield and productivity gains that are needed to feed the world in 2050 Third, global markets have to function effectively as food security for an increasing number of countries will depend on international trade and access to a stable supply of imports

development

Developing countries, in particular those with a high prevalence of hunger should create

conditions for a gradual increase of investments in primary agriculture, up- and

downstream sectors and rural infrastructure

A key question confronting governments, farmers and the private sector at large is which

level and composition of investment will be required to achieve the production needed to

meet future demand Related is the question whether the past and current trend of actual investment corresponds to those requirements Several institutions have presented estimates

of actual and required investment in agriculture

FAO’s experts, using a unit cost approach, have estimated total capital requirements in

developing countries needed to achieve future production levels consistent with FAO’s

baseline long-term outlook for global agriculture in 2050 The estimates cover most capital items in primary agriculture and downstream support services, without distinguishing public versus private sources According to these estimates, total average annual net investment required to deliver the projected production increases would amount to USD 83 billion, or an average gross investment, including the cost of renewing depreciating investments, of USD

209 billion, at constant 2009 prices Of this, net investments in agriculture would amount to USD 83 billion net per year on average These estimates exclude an eventual increase in demand for feedstock for biofuels

Source: Schmidhuber et al 2009

The global gap in what is required vis-à-vis current investment levels can be illustrated by comparing the required annual gross investment of US$209 billion (which includes the cost of renewing depreciating investments) with the result of a separate study that estimated that

Total annual investment requirements in developing countries'

agriculture (in 2009 US$)

developing countries on average invested USD 142 billion (USD of 2009) annually in

agriculture over the past decade The required increase is thus about 50 percent

There is empirical evidence that insufficient investment in agricultural production of

developing countries can have a severely detrimental impact on their food security Recent

research results show that, indeed, the agricultural capital stock per person active in

agriculture has grown least in those countries with the highest prevalence and depth of

hunger In countries with more than 20 percent of the population undernourished, growth in the agricultural capital stock has been outstripped by population growth, resulting in a

reduction in the level of capital per person active in agriculture The same is true for countries with a particularly high depth of hunger Investments have been particularly low and the capital-labour ratios have been declining in countries of sub-Saharan Africa and South Asia with the highest prevalence and depth of hunger Unless higher investments are made, the majority of the poor in these countries cannot introduce technical change and increase labour productivity

A related study presented by IFPRI, using a unit cost approach, calculated incremental public

investment requirements to achieve Millennium Development Goal Number One of

halving the proportion of poor and hungry people by 2015 in all developing countries The IFPRI estimate, covering agricultural research, irrigation and rural roads, amounts to USD 28.5 billion per year, which would actually double the amount of a baseline scenario The authors underline that achieving MDG1 will also require additional investments in

complementary services, such as secondary female education and access to clean water

Future investments are expected to support a growing substitution of labour with capital

and moderate total factor productivity growth There would be marked regional

differences, however In sub-Saharan Africa, for example, agriculture would remain

dependent on labour-intensive, capital-saving forms of small-scale agriculture and investment

in irrigation will be particularly important

Government expenditure on agriculture, focusing on transportation and market

infrastructure, on research and/or irrigation, is positively correlated with capital formation It strengthens incentives for the private sector, in particular farmers, to invest in productive assets It has been shown that while the level of government expenditure may have a

significant effect, changes in the composition of such expenditures, for example from subsidy payments to expenditures on public goods, may have a much more significant effect on rural incomes and income distribution

The need to significantly increase the volume of Official Development Assistance (ODA)

for agriculture and rural development has been underlined by various international

organizations and at highest political levels ODA can enhance the effectiveness of public funding Given the common purpose of public resources from domestic and from

international sources, both could be made complementary through effective coordination and joint targeting and monitoring in line with the Accra Agenda for Action To create stability, and as a matter of equity, developed countries could consider a proposal made at the Expert Meeting in June 2009 to pledge additional ODA to agriculture at the level of a given share of